Pimlico Plumbers fail at the Supreme Court

14 June 2018

Following a lengthy legal battle, the Supreme Court has released its decision (13th June) in the case of Pimlico Plumbers Ltd & Anor v Mr Smith which was heard in February 2018. The judgement concludes that Pimlico Plumbers’ appeal against the decision that Mr Smith should be classified as a “worker” as opposed to an “independent contractor” is dismissed.

Background

Between August 2005 and April 2011, Pimlico Plumbers Ltd (“Pimlico”) engaged the services of Mr Smith who, by trade, is a plumbing and heating engineer.

Mr Smith had two written agreements with Pimlico, the first dated 25 August 2005 and the second made on 21 September 2009. The appeal tribunal concluded that, on one hand, Pimlico wanted to present their operatives to the public as part of its workforce and on the other hand Pimlico wanted to render them as self-employed in business on their own account, whilst still rendering a significant amount of control over the operatives. The Employment Appeal Tribunal (‘EAT’) later made the assessment that the agreements had been “carefully choreographed” to serve these conflicting purposes.

Mr Smith started proceedings against Pimlico and its owner Charlie Mullins in August 2011 alleging that;

he had been unfairly dismissed

an unlawful deduction had been made from his wages

he had not been paid for a period of statutory annual leave and;

that he had been discriminated against by virtue of his disability

On 16 April 2012, the tribunal released its decision which concluded that Mr Smith was not an employee of Pimlico and so, could not make a claim of unfair dismissal, however, made three further decisions;

Mr Smith had been a “worker” for Pimlico within the meaning of section 230(3) of the Employment Rights Act 1996 (“the Act”)

Mr Smith had been a “worker” for Pimlico within the meaning of regulation 2(1) of the Working Time Regulations 1998 (“the Regulations”) and so Pimlico had failed to pay him for the period of annual leave

Mr Smith had been in Pimlico’s “employment” within the meaning of section 83(2)(a) of the Equality Act.

and so, could proceed with his latter three claims.

Pimlico appealed the tribunal’s three further decisions to the EAT and the EAT dismissed the appeal in a dated 21 November 2014. Pimlico appealed the EAT’s decision to the Court of Appeal who subsequently dismissed the appeal in a dated 10 February 2017.

The Supreme Decision

The legal battle over Mr Smith’s employment status has been a lengthy one and the first of its kind to be heard by the Supreme Court who made the decision to dismiss Pimlico’s appeal, ruling that the Tribunal was entitled to conclude that Mr Smith was a worker and he could, therefore, proceed with his three claims.

In order to establish whether Mr Smith should be classified as a worker, the courts have had to consider the provisions in the agreements and the reality of those terms in the day to day provision of services.

Throughout this case, one key indicator of employment status has been in dispute. Was Mr Smith required to personally perform the work for Pimlico Plumbers?

Following dispute surrounding the somewhat confusing terms in the agreement and the acceptance by all parties that Mr Smith was allowed to substitute but only with another Pimlico operative, the judge found that he had no express right to appoint a substitute to do his work and that the “swapping of shifts” between Pimlico operatives in the workforce was a means of work distribution and did not negate Mr Smith’s obligation to personally perform the services.

Other considerations were that the contract between Mr Smith and Pimlico referenced terms such as, “your skills”, which clearly demonstrates that the intention was for Mr Smith to personally perform the services.

There are other factors were considered to establish whether Pimlico was a client or customer of Mr Smith;

For Worker Status (Pimlico is not a client or customer of Mr Smith)

Against Worker Status (Pimlico is a client or customer of Mr Smith)

Pimlico exerted control over Mr Smith’s attire and administration aspects of the job

Mr Smith was free to reject offers of work

Pimlico imposed strict payments terms on the fees Mr Smith received

Mr Smith bore some financial risk for any discrepancies in the work

Pimlico imposed a range of covenants restricting Mr Smith’s working activities following termination

He was not supervised by Pimlico whilst completing the job

Mr Smith correctly presented himself as self-employed for the purposes of income tax and VAT

The Supreme Court concluded that, again, the Tribunal was correct in determining that Pimlico was neither a customer nor a client of Mr Smith. The Supreme Court ruled that whilst there were some factors which lent towards Mr Smith being genuinely self-employed, they were outweighed by other factors that “betrayed a grip on his economy inconsistent with his being a truly independent contractor”.

Aspire Comment

Although the decision, in this case, is very limited to the specific circumstances, it does demonstrate the importance of an unfettered right to substitute if someone is to be deemed genuinely self-employed.

Regardless of Pimlico’s resolve to take their case all the way to the Supreme Court, it appears that the absence of the right to substitute has been their downfall.

In order to avoid worker-led issues and Tribunal claims which could lead to hefty back-pay claims, it is imperative to have contractual documentation in place which are reflected in reality and would stand up under scrutiny.

If you have concerns about your engagement of self-employed workers, feel free to give one of the Aspire team a call to discuss.

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